Due Diligence

Association of Corporate Counsel website has an article about corporate counsels’ dealings with universities in the context of intellectual property intensive joint ventures. Much of the article is about practicing due diligence to be sure that patent ownership, patent equitable ownership and/or duties to assign future applications are clear and consistent as between the corporation and the university. the article then touches on a sometimes-sticky issue:

Finally, corporate counsel should request a meeting with the significant contributors to the inventions. Counsel for the university or nonprofit may not want to grant this request because the university often takes the position that the inventors are not essential to the negotiation process; however, it is critical to assess the inventor’s understanding of the arrangement and whether the inventor will continue to cooperate. Unlike large corporations, most universities and nonprofits provide a royalty stream to inventors associated with the licensing fees or revenue earned on those inventions. Since many of the inventions licensed are very early stage, it will be critical for the eventual commercial success of the technology to maintain an on-going dialogue with the inventor, and most importantly, include a “right of first refusal” or similar mechanism to ensure that as the inventor continues research on the basic idea, any improvements will be owned by your client.

Of course, whether extensive dialogue between the corporation and professor(s) will help things go smoothly, or otherwise, will depend upon the personalities and sophistication of those involved in a given university/corporate jv, but it is easy to understand why the corporation would want such a line of communication open.